Adam and I like to have a few glasses of wine on Friday nights, and sometimes it devolves into an enthusiastic whiteboarding conversation. We have a floor-to-ceiling mirror in the kitchen with dry-erase markers kept on hand for just this purpose. I woke up in the morning to a mirror covered in scribbles that we eventually pieced together.

This was actually the sequel to a conversation had 6 years ago with my friend Nishu, where we were figuring out how to use actual time as currency for trade. The intent was not to demolish the use of currency; it was to solve the deep inefficiencies in how time is traded today, inefficiencies rooted largely in asymmetric information. Outcomes or value created today are fundamentally not tied well to time contributed, which results in vast unfairness.

But just imagine, bracketing all your skepticism for a moment, a world where information was not asymmetric, where value contributed is known by all, and the rewards of creating value in the world are shared by all. It would change how we think about markets. Markets today are analogous to the second-price auction model - as a buyer, you value the asset at $X but what you pay is $Y, where $Y is a little more than the seller's next-best alternative (assuming $Y is more than their value and silly things like psychology don't get in the way). So buyers get the value of $X-$Y, and sellers get the value of $Y-cost. But what if the buyer's value and the seller's cost were known? What happens then?

Rather than hash through complex analytical models and reams of paper, let me tell you what I think will happen in a world where information is power, power is evenly distributed, and fairness is a generally universal moral pillar. I think we'd split the difference in value. Each person would get ($X-cost)/2. Makes sense. But what if one "person" was an employee and the other "person" was a corporation, and the asset being traded was time. Whoa.

If this was true, then in a way, it would strangely merge some of the value sets of communism and capitalism. Communism is about fairness and capitalism is about choice. But what if we could create world where we could allow everyone massive freedom to do what they will with their own human capital (which is overtaking financial capital as the scarce commodity)? What could be fairer than that?

The critical aspect here is the radical transparency of information. Information forces fairness (in a democratic world not dominated by physical threat). The average McDonald's franchise in the US generates $2.5 million in revenue and the average salary of an hourly worker there is $7.73. Putting aside for now how we would find this out, what if it was factually known that the efforts of a given hourly worker were generating an incremental $100,000 of exclusive, non-overlapping earnings above and beyond what McDonald's next-best alternative was? Wouldn't it make sense to pay that worker $66,000 per year rather than $16,000? I'm clearly avoiding the subject of returns to financial capital here but I'll address it later and suggest a way to make it a moot question.

But we skipped over another critical element here as well - how do you do this? The real problem was always asymmetric information. Isn't information naturally asymmetric? That kind of radical transparency sounds more like an ideal than a pragmatic possibility.

In response, let's take a different example. In your typical big consulting firm, you have client projects delivered by teams. Those projects are sold by partners with an equity stake in the company. Each project has its own little P&L (profit-and-loss statement), and so the value of the outcomes are well-defined once the project is complete. If we were to take a given project, whose known net value generated for the organization is $1 million, and try to put a percentage number against how much proportionate value each member of the team contributed, including the partner who sold the project, how would you do that? Arguably, every member of the team was critical to the overall effort - i.e. without any single member, the project would not have been successful.

This is a hard question because the answer is distributed. Each person on the team holds a fragment of the answer. There may even be people outside the team who hold a fragment of the answer. And each fragment is of different size - i.e. someone who has worked on the project 80 hours a week has more information than someone who has advised on the project for an hour total. Each fragment is also of different quality - e.g. someone who is more experienced may exhibit higher-quality judgment. Everyone is also biased towards themselves, unconsciously as well as consciously.

But what if you could put all those puzzle pieces together, and wash away most of the major errors? Then you would have essentially a pie chart, where the whole represents the total value generated, and each slice represents the mutually exclusive proportion that each person has contributed.

Here's a probably wrong idea of how to do it:

1. Collect a 100-point force-ranking from everybody who knows anything: Ask each person who has a fragment of information to confidentially allocate 100 points to all the individuals on the team, based on perceived value contributed. Each would look something like this:

Sally = 50

John = 20

Bob = 10

Jerry = 5

Fred = 5

Wanda = 3

Will = 3

Hal = 2

Trent = 1

Rod = 1

2. Expose the 100-point force-rankings anonymously to everyone for veto: If a majority of information holders reject a given allocation, guided by the principle of reject-if-false-intent-is-presumed (and possibly with a limit on number of rejections per person), then that individual has one more chance to fix their allocation before their input is thrown out. This step is to avoid gaming by individuals. [As a slight tweak to improve accuracy, instead of a majority of information holders required to veto, the rule could be revised to "the majority of information holder hours represented." The assumption being that the more time spent on the project, the more information that individual has about value contributed (not, it is important to note, the more value the individual has contributed, time not being equivalent to value contributed).]

3. Weigh each allocation based on the number of hours the assessor has spent on the project (a proxy for amount of relevant information held): While hours worked is an imperfect proxy, it is the closest thing we have to an objective, non-political measure of how much information an individual has about who has contributed what. Someone who is working full-time on a project knows significantly more than someone advising on a few-hour-a-week basis. If Bob's total hours spent on the project is 25% of the total, then all of the rows in his distribution are multiplied by 0.25. By the way, to prevent gaming of hours tracked, you can also expose the number of hours worked to everyone as well and allow for another veto-edit protocol (you can even expose across all projects to identify extreme cases where someone's hours on every project add up to something beyond the realm of credibility).

4. Then add up horizontally all the points a team member has received and divide by the total: Points across all information holders are added for each team member, and a proportionate figure of the total derived for each member, a number that represents the best approximation of "What percent of the total value created was this individual responsible for?"

Once you have that number, you can do a lot with it.

But - we still haven't addressed the subject of returns to financial capital. It takes financial capital to deliver on a project - there are laptops to buy, equipment rent, conference call bills to pay. I'm going to propose a way to address this that's quite radical - why don't we have everyone contribute an equal share of the financial capital? Then the question becomes a moot point, and all the human capital can receive 100% of their proportion of overall value created. It's a form of a partnership, in the professional services sense, where everyone holds equal equity share in the stakes of the project.

But what if a team member doesn't have the financial capital to contribute? In that case, the remaining team members can essentially loan them the financial capital, as an investment with some interest return, and it would be recouped when positive outcomes are achieved at the end of the project. It is a true investment, in the sense of risk as well as rewards, and not dissimilar to how a new partner buys into a professional services firm today.

With this model, in an organization with many projects, everyone essentially becomes a partner in the enterprise. You could even pay out all value earned in equity in the enterprise, assuming it was large enough that there was liquidity for the equity within an internal secondary market (so people can pay rent and what-not).

Where there are projects where the value created is less clear (e.g. cost centers), you could do a tiered version of this allocation-weighing method at multiple and higher levels, e.g. at the practice, business unit, or overall firm level, among projects. What matters is that you do it at a level where the value of outcomes are well-defined, e.g. there is a P&L.

You do need systems and protocols that are well-designed, easy for the information holders to provide input, transparent, generally automated, and hard to game. The more you introduce asymmetric human judgment, the more you create power situations and politics.

What I think is wonderful about this is that it creates incentives to share information within the team, between teams, and perhaps even beyond the firm. On that last, there's a whole 'nother post that could be written about that. Anyway, that was the result of a few glasses of wine and whiteboarding on a Friday night.